Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more ➡
Download
Standard view
Full view
of .
Add note
Save to My Library
Sync to mobile
Look up keyword
Like this
1Activity
×
0 of .
Results for:
No results containing your search query
P. 1
Upstairs - Downstairs

Upstairs - Downstairs

Ratings: (0)|Views: 241|Likes:
Published by danvil33

More info:

Published by: danvil33 on Sep 29, 2011
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See More
See less

09/29/2011

pdf

text

original

 
nade
Trends
I
Upstairs,downstairs
Floortradersandupstairstradersmayprowlthesamemarkets,buttheyworkindifferentworlds.
Futures
spenttimeinthepitsandonatradingdesktocaptureadayinthelifeofthes,&:p500marketfrombothsides.
Editor's
note:
Howyoutradedepends
on
whereyouare,either
in
thepit
or
byacomputer
screen.
Two
Futures
editorsrecently
spent
a
day
among
thetwotypesojtraders-MarkEtzkornwith
S&P
floor
tradersJoeSlottandKeithCook,DavidNusbaumwithLinda
Bradford
RaschkeojLBRGroup.Herearetheirtwinaccountsojwhatitwaslike
to
trade
S&P
500
futuresDec.
8,1995
(All
timesareCentralStandard
Time).
-
'
Two
'views:.
of·
!
.the·rrI,arket.:
..I
By
DavidNusbawn
&
MarkEtzkom
I(
sonlyappropriatetostarta
.day
ofpitwatchingatLou
MltcheJJs
restaurant.Thenoisy
diller
withitsdouble-sizeeggsisapopularbreakfastspotwithtradersfromtheChicagoMercantileExchange(CME)andtheChicagoBoardofTrade(CBan,eacha10-
to
15-minute
walk
away.At6:45a.m.,it's
already
packed.AmongthepitdwellerssprinkledthroughoutthecrowdedroomisJoeSlott,alocalintheCME's
S&P
500futurespit.Slott(acronymSLOT),38,isa13-yearveteranofthepitsandhasdone"alittlebitofevery-thing:"runner,phoneclerk,outtradeclerk,brokerandnowfull-timetrader.Aftera
'stint
asa
filling
bro-kerinthe
S&P
frommid-1991
to
theendof1993("thosearetheyearsI
58
Futures
February1996
lostallmyhair"),hedecidedtobecomealocal.Thetransitionwasfairlysmooth,whichSlottattributestohavingtradedonandoffsince1983."IlearnedhowtotakealoserbeforeIenteredtheS&Ppit."Slottsays."rIhat'sl
90010
ofthegame."Slotthasfoundtradingawel-comechangefromthestressof
fill-
ingorders."Ifindbeingalocalveryrelaxing,likeplayingagame,"hesays."Youtradeatyourownspeed.Ifitgetstobusy,yougetflat,putyourhandsdown.collectyourself,andwhenyou'reready,youbeginagain."Slotthasneverhadalosingmonthandfewlosingweeks.LosingdaysComewiththeterritory.
•••••
TheRaschkehomeinMarlton,N.J.,isabout800mileseastoftheChicagotradingpits,butamillionmilesawayinmood.AcrosstheDelawareRiverfromPhtladelphta,thewoodedsuburbisalmostrustic,
if
notforthesubtleaffluenceandoccasionalgolf
cart
crossingsigns.Twohoursbeforethe8:30S&Popen,LindaBradfordRaschkehasalreadygotteninanhourofintervaltraining.Sittingbyascreenalldayoffersevenlessexercisethanstand-inginaswarmingmassoffloortraders,whilethe36-year-oldRasch-ke,wholefttheflooraftera1986horseridingaccident,alsomustguardagainstarelapseofchronicfatiguesyndrome.Shemaymissthefloormorethansheknows,judgingbyherfavoriteexercise,taekwondo(she'sabluebelt).Nothingrelaxes,she
says,
likekicking,punchingandshoutingatthetopofyourvoice.Aftercoffeeanddonutswithhus-bandSkipandseeingseven-year-olddaughterEricaofftoschool,it'sonlyafewstepsfromthekitchentothetradingroomwheretradingpartnerRickGenettandRaschkemanageLBRGroup's$30million.Mercifully,itisnothinglikethewindowless.cinderblockbasementofficeRaschkeusedforyears.Afireburnsinthefireplaceofthehigh-ceilinged,coralwallpapered,30-by-30room.
It
isdominatedbyalong,horizontalwindowsethighenoughtoblockallsignsofneighboringhouses,reveal-ingonlytreetopsandbluesky.Beneaththepanoramaarowofcomputerscreensandatablerunthelengthoftheroom.RaschkeandGenettcampoutatoppositeendsandawaittheopen.(Genett,37,isaWisconsinnative,hiswifeisaballerinainthePhiladelphiaBal-let.)Raschkekeepsadailylogbyhand,jottingdownhighs,lowsandpivotpoints.ShealsostudiesthenightlytradingsheetsheandSteveMooreofLBRMooreTradingInc.putout,showingpivotpoints,trad-ingpatterns,customoscillatorsandRaschke'sowncomments.Atthebottomshe'swritten."Todaymarkstheone-yearanniver-saryofthecurrentbullmarketin
 
................u........
iIiII·iiII
MarchS&P500,two-minutebar
..SL.O.T8.h
ort,
.b
li.t'.'.'..
RIS-,Ksells
at6.23..•..45,
re.ve.r.
e.
8
P.
).Sit.
io.
.·.·.n.
·.a.
t·.
.2.3.50
RISKmates
final
Ih,.,·
JI
covers.ioe
arnall..
and623.65,sell.s
out
ataprofitat624:00~.1O...trades..
of...
tzy.".'
'T'd''..:
edly'
~f~~,~,mmifi(aI!~...
tJ\~~
~'~,;;{~r';1~.....
\~··!fl·.'....~
u
or
report
It;
i
II:
If!
,'1fL
'I'
I:i'llr~r1"1
buyeron
the
open.'.~
JI~
.1.
~Itk,~~':'/'."'".~.
'."'"...._11...~
~I
,~L.jJl
RISK'PUYS'..,
stOTbuysat623.IO;~'".
I'
Locals
sellmtosmau
r
"Iii'
~:~~~~~:£3{)fOr;
I
stops.
SalOmOn
Bros;.
!
bl.lY&backdownto
also
,a
s~~r.·"
r"
~Z3.00-
"b.e.s:
t
Lo7.
t.rad·
c·.
al·.
·se.··,'are··"..•.
buyersat
edNiQe.Cha.irm.an
Blindel'makea
SLOT-JoeSlott
a.nnOtUl,Cement,-;
~LOT;caUght
it:
thiieD.\l
1
6fthedW.
Paper
supportlong,8\:la~largest:loBtjofdlw·..",....,..,..
RISK-KeithCook~Localstumbid.
L----'r":,...-..,,-...,..;.;_;_--~..,;-..__r_'--.,,-+---.----'--~~-___:,......':_'___,_-_._-r___,_::>""~,.:c_-----.__-='
620.009:0010:3012:001:303:0
AfewrepresentativetradesoffloortradersJoeSlottandKeithCookhighlightsomeoftheday'smorenotablemoves.
So
uree:FutureSource
,stocks.Thisbullmarkethaspersist-
I
edwithoutevena3%correction!"
•••••
SlottusuallyarrivesattheCME,around8a.m.(frequentlybiking,
I
eveninwinter,fromhishomein
I
nearbyUttleItaly),ahalfhourbefore
I
tradingcommences.He.firstcheckshisstatementandhisouttradestomakesurehismoneyisrightfromthepreviousday.Afterclearingup.any"clericalerrors,"hepunchesupashort-termchartofthepreviousday's
S&P
action(five-minute
bar)
toseepossiblesupportandresistancelevelsforthecurrentday."ImightwrttedowntwoorthreenumbersI.cantradearound,"hesays,compar-ingthelevelshelooksfortoMarketProfilevalueareas.Healsomakesa
!
quickcheckofthebondmarketandwhatthe
S&P
didovernight.Slottusuallystaysinthepitallday,tradinginone-and-a-half-totwo-hourstretches,takingperhaps30minutesforlunchanda15-minutebreakinthemorningandafternoon."I'mbasicallythereeveryday,buzzertobuzzer,just
try-
ingtomakealiving,"hesays.Slotthasstudiedfundamentaland
!
technicalanalysisforyearsbutis,philosophicalabouttheirimportance
!
to.hisday-to-daywork."I'mastu-
I
dentofthemarkets,Iepjoy
talking
.markets'--Ican'thelpbuthave
!
opinions-butmyincomeismade
I
trading,"hesays."Thetruthis,
i
whateveranalysisIdointhemarket
I
isprettyirrelevant.Over900/0ofmyincomedoesn'trequirechartsor•analysis.I'mjustreactingtotheorderflow.That'sthebulkofthe
typ-
icallocal'sincome."
•••••
Oursecondfloortrader,KeithCook(acroilymRISK),35,followedapathsimilartoSlott's.Startingoutasanmnerin1984,hebecameafillingbrokerin1987(workingthroughboththe1987and1989crashes).tradedforayearandahalf,tookaleaveofabsenceandbegantradingforhimselfinAugust1995.Cookdescribeshimselfasasmalltrader-a"truescalper"-tradingabout30-40contractspersideeachday.He
has
broadguidelines,butnohardandfastrulesabouttradinglimits.Occasionallyhe'lltradea10-lot,butmostlytradesfiveorfewer.contractsatatime.Hesometimesaddson
to
winners,butneverlosers,andgetsflatbytheendofeachday.Heaveragesaround20ticks($500)ona
winning
day,40onagoodday.Hetriestogetoutoflosersafterthreetofourticksandlooksforaround10ticksonawinner,UnlikeSlott,Cookavoidstheopenmgandoftentheclose.Heusu-allystartstradingaround9:30a.m.Becauseouttradesmustberecon-ciledbeforethenexttradingsession,Cookcallshistradecheckerfromhomearound8:00a.m.tofindout
if
thereareanyproblems.LikeSlott,
625.00624.50621.00620.50
helivesinChicago,onthenorthside,abouta30-minute
train
com-mutetotheCME."IskipthefirsthourbecauseIliketo
warm
up,andI
think
it'sbetterto·letthemarketsettledownalittlebit,"hesays.Afterresolvinganyout-standingproblems,hegetshimself"psychedup"fortheday'strading.
"If
Igoin'therewithanykindofa
i
negativeattitude.itgenerallyrubs,offonmytrading,"hesays.Cookhasconsultedchartsinthepast,butnowconsidersthema·crutchthatcanbiastrading,causing
I
youtohangontoaloserbecauseyouthinkthemarketwillobeyatechnicalsupportorresistancelevel.,Although(likeSlott)he
was
attractedtotradingbecauseofthe"controlfac-tor,"Cooksaystradingisnotwithoutstress-justadifferentkindofstress.Hedescribesbeingalocalas"youagainstyourself.Icontrolevery-
thing.
Whenyou
fill,
you'reatthemercyofyourcustomers."
•••••
Bullishstockand.bond.mar-
·kets
were
the
rule
in
the
days
precedingDec.
8.
Inflationseemed
dead,
theeconomylookedsluggish
and
Wash-
ingtonslowlyapproacheda
balancedbudget-all,
!
conditionsnudgingthe,U.S.FederalReserve,
I
towardcuttingrates.·MarchT-bond.
utures
(up
22/32to120
I
22/32
by
8:25
am)
I
reflectedthecom-monbeliefthat.FedFundsrates
would.
fall
50
basis
points
by
i
spring,
adding
momentwnto
stocks.
ThisFridaymorning'seconomicnumbers.fit
the
scenarionicely.
III"
Futures
February199659
 
-
TradeTrends
III"
At7:30a.m.,Novem-
ber
nonfarmpayrolls
and
tmemployment
rate
nwn-
bers
came
outnearex-pectatiOns:Unemploy-mentrose0.1
%
to5.6%;the166,000netnewhireslookedhigh,butreflectedanextra
week
of
data..
•••••
TheunemploymentnumberscomeoutafullhourbeforetheS&Ppitopens,butRaschkeseesMarchEurodollarsreactingstronglyandaddstoLBR'sexistingshortposi-tion.Intheminutesafter
7:30
shesells100,then
100
moreandisfilledwithintwoticksofwhatwillbetheday'shigh."Well,thatwaseasy,"shesays.Butthetradehadlesstodowithnumbersthanwithpricepatterns(see"Firstcross,"below).Raschkeignoresfundamentalsandconcen-
Firstcross
Raschke'sEurodollartradewastriggeredbyabasicbutfavoriteoscillatorpatterncalleda"firstcross."(Herethe"fastoscillatorisa3-10dualmovingaverageoscillator,whilethe"stabilityoftrend"line,orslowline,isa16-periodmovingaverageofthe3-10.Raschkeaddsthatoscilla-torsareonlyusefulinswingtradeswithcertainpatterns.)Thestrategyistosellthefirstpeakinthefastoscillatoraftertheslowlinecrossesbelowzeroforthefirsttime.(Forabuysig-nalyouwouldbuythefirstpull-backinthefastoscillatoroncetheslowlinecrosseszeroforthefirsttime.)Raschke'snotes:Thecorrespondingpricepatternusuallyisthefirstlowerhigh(forasell)orfirsthigherlow(forabuy).Thefirstpeakorpullbacktendstobethebest;probabilitiesfalloffwithlatermoves.Weessentiallyget"pieces"ofthetrend(heresim-plydefinedbytheslowlineaboveorbelowzero)andexitbeforethetrendstartsturning.Coodforcatchingsteadyprof-its,notrunawaymoves.
Source:AspenGraphics
60
Futures
February1996
tratesonshort-termpatternrecog-nitionandcatchingtwo-tothree-daypriceswings,varyingherentriesandexitsduring"buy"or"sell"days-conceptsfirstde-scribedinGeorgeDouglassTaylor's
TheTaylorTradingTechnique
(Raschke'sownbookonpricepat-ternsisdueoutinearly1996)_SixcomputerscreensfaceRaschke,somerunningAspenGraphicsorBarryVaniel'sInsightsystem.Raschkejumpsfromweek-lytodailytotickchartsthroughouttheday,buttheonescreenreport-inghigh,low,lastandclosingpricesremainsconstantanddirect-1yinfrontofher-asortofRosettaStonelinkingRaschketoherfloortradingdays15yearsprioratthethen-PacificCoastStockExchange."It'sbadtoflipthroughchartsdur-ingtheday,"shesays."I
try
tolookatquotes,otherwise111startplaying."RaschkeandGenetttalkaboutthedayaheadforstocks.Afterabig
Keltnerchannels
~94.65
,
~
~94.60
MarchEurodollar(30-minutebars)
~94.55
,
.
I,
.040.030.02
'I
]0.01
"
l!
0
i
-0.01
1
-0.02~.-0.03--1-~-6------~1~-------'1~~8-----~
movethe
S&P
needstoconsolidate,·soRaschkeexpectssidewaystradingwithadownwardbias.Withahintofgleeshepointsoutadaily
S&P
chart
I
withafeweagerpricebarspokingclearoutofaKeltnerChannel(Raschkeusesa20-periodexponen-
tial
movingaverageasthechannel'scenter,itsouterboundsare2.8timestheaveragebarlength;see"Shortmemory,"page63)."Iwashaving
fun
theothernight.andwantedtoseewhathappenedwhentheS&Pgetsthisextended,"shesays.HervisualsearchtookherbacktoAug.13,1987~just•weeksbeforethebigcrash.Howfarmightitfallthistime?"Well,it'spulledawayby...[shepauses,thenholdsuptwofingers)oneinch."MeanwhileoneoftheRaschke's
I
smallmenagerieofpets,asix-toedcatnamedTony(anothercat,Joanna,andaDalmation,Axel,alsoappear),climbstherowofmonitors,selectsoneandfallsasleep.
•••••
At8:15a.m.,theS&P500pitisnotevenhalffull.Tradersandclerksmillabouttheperimeterofthepit,checkinglastminuteouttrades,makingsmall
talk
andshar-ingstraybitsofmarketnews.
By
8:20a.m.,JoeSlottisinthepit,chattingwithothertraders.(KeithCookwillstartlaterthanusual,around10:00a.m.)Thephonebankssurroundingthepit·aremannedbyharried-lookingclerksandbrokerswhochecktheirlines,takelateordersandgiveinstructionstorunners.Theunemploymentreportwasclosetoexpectations,andalthough
I
afullcrowdwillbeonhandto:"tradethenumber,"itisnotexpect-edtohavemuchofanimpact.Traders
finally
packthepit
full
inthelastfiveminutesbeforetheopen-ing.Theystudythebrokersnmmmgthepit,lookingtoseewho'sbiddingandwho'soffering.At8:30,thebellclangsandtheshoutingbegins.
•••••
MarchS&Psawakeat8:30withabang,upadollar(a
full
point)at624,andquicklyapproachyesterday's
high.
Raschkeoffers25atthemarket;sixminuteslatershebuysthem
back.
"Theopeningwasoverdone.They'regoingtodiddlearoundherealittlebit.It'sgoodtostartthedaywithaquickscalp."Thetake:eightticks,or$5,000."Youprobablywon't

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->